Your Credit Score in Canada

Your credit score is a judgment about your financial health, at a specific point in time. It indicates the risk you represent for lenders, compared with other consumers. It can change from month to month based on how you treat your debt.

There are many different ways to work out credit scores. The credit-reporting agencies Equifax and TransUnion use a scale from 300 to 900. High scores on this scale are good. The higher your score, the lower the risk for the lender. Lenders may also have their own ways of arriving at credit scores. In addition, lenders must decide on the lowest score you can have and still borrow money from them. They can also use your score to set the interest rate you will pay.

What is your Credit Score

Benefits of a Credit Score above 750

Lenders offer a quick approval and the best possible rates

This score says the person is reliable and responsible with their debt.

you may be eligible for higher lending limits on your credit cards or a higher mortgage amount.

Challenges of a credit score below 620

your could pay a premium on your mortgage rate

you may find it difficult to qualify for a mortgage.

you may get turned down for new credit like Credit cards or auto loans.

How your Score is Determined

Previous Payment history (approx. 35% of your score)

Current level of indebtedness (approx. 30% of your score)

Length of Credit History (approx. 15% of your score)

Pursuit of new Credit (approx. 10% of your score)

Types of credit available (approx. 10% of your score)

You should check your credit score at least once per year for inaccuracies. At that time its good to see who else has looked at your credit as it is recorded in your record. If there is suspicious activity with your credit, it will show there.

There are two ways you can get your credit.

Mail = Free (slower up to six weeks and may not have a score on the report)

Paid = instant or same day (but may cost you based on the company you choose above)

Health and Dental Insurance

We are very fortunate to have one of the best health care systems in Canada. However, there are some items that are not covered by our health care system such as health and dental coverage. This may be for things like prescription drugs, dental exams and cleanings etc. and trips to health care practitioners such as Chiropractors, Naturopaths or Registered Massage Therapists. For these things you can purchase Health and Dental Insurance.

Other items that you may be concerned about is vision care if you wear glasses or contacts and having emergency medical travel coverage if you travel outside of your province or outside of Canada.

You can purchase your own individual health and dental plan as an individual, as a couple or you can purchase a family plan.

There are multiple companies who offer Health and Dental Insurance. We have listed two of the companies that we deal with that have very competitive rates. They are Manulife and Sun Life. Please see their links to their health insurance plans below.

If you are leaving a group plan, with Manulife you have 60 days to apply for coverage under their Follow Me plan. You don’t have to be leaving a group plan where Manulife was your provider. You could be leaving a plan with Blue Cross, Sun Life, Great West Life or any other company. As long as you apply within 60 days of leaving your plan, then you can apply for Follow Me coverage.

Sun Life has a similar program called Health Choice where you can apply for coverage within 60 days of leaving a group plan.

If you have any questions at all regarding leaving your group plan, please email us at the link below:

Travelling to Cuba?

It has been a law since May 2010, that if you are travelling to Cuba, they can request proof of medical insurance. Canadians were presenting their provincial health insurance cards as proof of insurance.
Now Cuban officials are asking for proof of private travel insurance. Nobody likes to think about getting sick or hurt on vacation. What happens if you get stung by a jellyfish? Have an allergic reaction to an insect bite?
What if you cut yourself and need stitches? What if you have a heart attack?
The best way to protect yourself is to purchase travel insurance.

Why should I purchase travel insurance?

Your Canadian health insurance is almost certainly not valid outside of Canada.

Your provincial or territorial health plan may cover nothing or only a very small portion of the costs of medical care abroad, and never up front.

Foreign hospitals can be very expensive and may require immediate cash payment. You could face years of debt paying off the costs of treatment for an illness or accident you suffered abroad.

The Government of Canada will not pay your medical bills.

Travel Insurance is available as a stand alone product from various companies, each with a different offering. As an example, a 45 year old male can Purchase Travel Insurance for as low as $25.00 for an 8 day single trip or for an 8 day multi trip plan they start at $50.00/yr.* Multi trip plans are good if you travel multiple times throughout the year.

$5,000,000.00 of Emergency Medical coverage available if you are out of your province gives peace of mind, so you can enjoy your vacation.

Check out our website at Godfroy Financial to get your quotes and apply online to ensure you have the coverage you need.

*example only, a quote is needed for your specific health
and lifestyle. Get your quote from the link provided or
call us at 226-444-8372 to get your specific quote.

You can save money on your life insurance coverage by working with a broker. Brokers have the ability to shop around to ensure that you are getting the best price available in Canada for your insurance coverage.

If you are researching buying a policy, be sure to find out if you and your spouse are going to be on the same policy. Life insurance companies charge a monthly administrative fee on your policy. This is standard with every company. Some companies charge $5 per month per policy and some charge $10 per month per policy. Some charge $50 to $90 annually for the policy fee. This policy fee is built into the monthly cost of your total premium.

The key thing to be aware of is that some companies will only give you one type of product under one policy number. For example, you may have a husband and wife who each buy life insurance and then they each might buy Critical Illness Insurance. Some companies will bundle this coverage all under one policy number so there is just one policy fee. Some companies will give you 4 separate policies so you are actually paying 4 policy fees.

An easy way to determine how much you pay for the policy fee is to call your advisor or look in your insurance policy. It will be spelled out as to how much your policy fee is either monthly or annually.

Another way to save money is to pay your policy annually versus monthly. I recently quoted a 45 year-old man and his 41 year-old wife a 10-year $250,000 term policy each. They are both non-smokers and the cost was going to be $39.61 per month. If they paid for the policy annually the cost was $440.09 for a savings of $35.23 which is almost one month’s premium.

Most life insurance companies are set up so that you can make an annual payment online through your online banking or they will mail you an annual letter with an envelope and you can mail them a cheque. If you have the affordability to make an annual payment, then you can save yourself a little bit of money.

Go to our web site www.godfroyfinancialgroup.com and click on the heading “Life Insurance Quotes” to run some comparisons for you and your family or give us a call and we can run the quotes for you.

Total Savings: Could be $5 per month, could be $20 per month or more depending on the number of policies that you own.

Depending on how much money you make each year, your Canada Pension Plan contributions and Employment Insurance contributions may be paid up in July or August each year. At this point, your take home pay is normally $115 more each week if you get paid weekly.

The key to get ahead financially is to save that money each week in a TFSA or RRSP.

The maximum amount that an employee will have come off their pay cheque in 2016 is $2544.30 for CPP and $955.04 for EI. Keep an eye on your paystub to see when you are approaching the maximum amount.

Here’s an example of Joe that makes $90,000 per year salary. Now Joe’s gross weekly pay is $1730.77 ($90,000 divided by 52 weeks). He then has $397.47 in federal tax deducted from his cheque, $82.34 for CPP and $32.54 for EI. Now Joe may also have other deductions like his health plan or life insurance that is deducted from his pay but for simple illustrative purposes we are just going to focus on tax, CPP and EI withdrawn.

Joe gets paid every Thursday. His first cheque for 2016 was on January 4th and he took home $1218.42. Now on Joe’s August 11th cheque, he will have his CPP paid up and on his August 4th cheque his EI will be all paid up.

Now Joe’s August 11th take home pay will be $1333.33. Joe decides to take $115 per week and put that into a TFSA from August 11th to December 29th. Total contributions equal approximately $2415.00 (21 weeks X $115.00)

If Joe did this every year, in 10 years, based on a 5% rate of return, Joe would have an extra $31,000.00 built up.

Now one thing to keep in mind is that if Joe received a bonus or incentive in the first half of the year, he will pay up his CPP and EI more quickly.

If you don’t have a plan, then you will find other things to spend your money on. I see it happen every year with clients and prospective clients that come into my office.

Be one of the smart, disciplined investors that makes the decision to tuck this money away. Hey Joe went from January to August on $1218.42 take home each week. Surely he can survive from August to December on the same $1218.42 take home pay and he can put the rest away. You can do it too.

An annuity is a investment product sold by financial institutions and in particular life Insurance companies. They are designed to work like a work pension plan, where they give a fixed payment for a period of time.
They can be purchased individually as term, life-time, inflation indexed, or for a joint life (term or life)

Guaranteed Monthly Income
Basically, you pay a financial institution (often an insurance company) a sum of money and they give it back to you in regular monthly payments, as determined by many factors such as your age, sex and the length of term you want guaranteed income for. You receive a regular income stream made up of interest and principal.

Are they for everyone?
If there’s no chance you’ll run out of money, annuities are probably the wrong choice. They make little sense if you have an ample employer pension, or you are poor in health. Since your work pension is already giving you an income for life, the best return on your money that is in an annuity comes from living much longer than the average person.

They are good if you need to top up your guaranteed monthly retirement income from all your sources to maintain a certain standard of living. (CPP + OAS + Work Pension + Annuity = Guaranteed Retirement living for life) You do not need to invest all your savings into an annuity. Just purchase what you need to get that monthly amount that you want to live with in your retirement years. You have the freedom to use the rest of your savings as you please since you opted to not lock in your whole annuity.

If you want to learn more about Annuities and if they are right for you, speak to a licenced life agent such as ourselves, or one in your community.

A Segregated Fund (also known as Seg Fund for short), is a type of investment fund administered by Canadian insurance companies in the form of individual, variable life insurance contracts offering certain guarantees to the policyholder such as reimbursement of capital upon death or upon Maturity.

A segregated fund is an investment fund that combines the growth potential of a mutual fund with the security of a life insurance policy. Segregated funds are often referred to as “mutual funds with an insurance policy wrapper”.

Like mutual funds, segregated funds consist of a pool of investments in securities such as bonds, debentures, and stocks. The value of the segregated fund fluctuates according to the market value of all the securities held within.

Segregated funds do not issue units or shares; therefore, a segregated fund investor is not referred to as a unit-holder. Instead, the investor is the holder of a segregated fund contract. Contracts can be registered or non-registered. (held in or outside of an RRSP or TFSA). Registered investments qualify for annual tax-sheltered RRSP or TFSA contributions. Non-registered investments are subject to tax payments on the capital gains each year and capital losses can also be claimed.

Segregated Funds are only sold only by licensed insurance representatives. The monies in a Segregated fund must also be kept aside from all other company assets in the insurance company.

Segregated Funds offer the following guarantees. Maturity & Death Guarantees, Potential Creditor Protection, Probate Protection, and depending on the company, they have the Reset option of annual to every few years. A Segregated fund allows the contract holder to take a little more risk with their investment, because of the Maturity protection, or fear of downturn in the markets.

There comes an added cost to Segregated funds because of the guarantees and insurance added. This varies by company and contract, but most often can cost .5%-1% in additional MER fees that would normally be charged my a comparable Mutual type fund.

For more information on how Segregated funds can fit in your portfolio and the companies that offer them feel free to contact us.

There may be certain circumstances with your family situation where you might want to consider using an Annuity Settlement Option (ASO) rather than leaving a lump sum payment to a family member when you pass away.

An ASO allows you to specify the amount and frequency that a beneficiary will receive money. For example, let’s say you have $500,000 in assets that you will be leaving to a beneficiary. You may want to make sure that this money lasts them for the next 25 years. You can specify that when you pass away that the money be put into an annuity and your beneficiary would receive $20,000 per year (plus interest) for the next 25 years.

This strategy is beneficial for beneficiaries who cannot manage assets, to ensure there is money for a child or grandchild to go to college or university and this may also be beneficial for certain ODSP recipients.

Here is an example:

You may have a son or daughter that is not good at saving and feel they would blow an inheritance or payout from your life insurance policy. You could set them up to receive a certain amount each year as we described above. If you have more than one beneficiary you can create different ASO’s for each. You can select to have one person receive their full amount at death, and the others you may use the ASO. It is really up to you and how you wish to setup your beneficiaries.

An Annuity Settlement Option has no fees or ongoing management requirements. You as the owner of the policy get to control the specific terms of the contract. It is a simple, inexpensive and effective wealth transfer tool. An ASO provides savings of probate, and estate fees, increased privacy, and potential creditor protection.

Annuity Settlement Options are only available through life insurance companies, sold by Licenced Life Insurance Advisors.